REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL & TAX DIVISION

CIVIL SUIT NO. 501  OF 2010

K-REP BANK LIMITED...............................................PLAINTIFF

VERSUS

SEGMENT DISTRIBUTORS LIMITED.....................DEFENDANT

RULING

[1] The Notice of Motion dated 5 October 2016 was filed herein by the Defendant pursuant to the provisions of Article 50 of the Constitution of Kenya, 2010, Sections 1A, 1B, 3 and 3A of the Civil Procedure Act, Chapter 21 of the Laws of Kenya and Order 9, Order 10 Rule 10 and 11, and Order 51 Rules 1 and 15 of the Civil Procedure Rules, 2010 for the following orders:

[a] That the application be certified urgent and dispensed with in the first instance; (Spent)

[b] That pending the inter partes hearing and determination of the application, the Court be pleased to stay the execution proceedings herein;(Spent)

[c] That the Defendant/Applicant's Advocates, M/s Robson Harris & Company Advocates, be granted leave to come on record after Judgment;

[d] That pending the hearing of the application inter partes, the Court be pleased to issue an Order to Stay the Execution of the Judgment entered herein on 20 May 2012 in its entirety; (Spent)

[e] That the Court be pleased to set aside the Judgment entered  herein on 20 May 2012 in its entirety and the Defendant/Applicant  be granted leave to file and serve its Statement of Defence out of   time;

[f] That the Court be pleased to make such Orders as it deems  mete and just;

[g] That the costs of and incidental to the application be   provided for.

[2] The grounds upon which the application was premised are that the Court has issued a Notice to Show Cause against Paul Kiprop Kandie and Benjamin Kimeli Tanui who are directors of the Defendant/Respondent to appear before the Court on 6 October 2016 to show cause why they should not be committed to civil jail; and that the Defendant and its directors were at all material times unaware of the suit herein as the company was not served with the pleadings, and only got to know of it when they were served with a Notice to Show Cause on 5 July 2016, requiring their attendance before the Deputy Registrar. It was then that the Defendant instructed the firm of Robson Harris & Company Advocates to peruse the court file to establish the nature of the proceedings and its status. It was further the contention of the Defendant that it has a plausible defence to the Plaintiff's claim and therefore ought to be given an opportunity to defend itself in accordance with the dictates of the Constitution of Kenya and the principles of natural justice. The foregoing grounds were reiterated in the Supporting Affidavit sworn by Paul Kiprop Kandie on 5 October 2016.

[3] On its part, the Plaintiff relied on the Replying Affidavit sworn by its Legal Manager, Arnold Kwesiga, filed on 17 February 2017, and the Further Replying Affidavit sworn by its Legal Officer, Beverline Chweya on 18 July 2017. The Plaintiff's posturing is that the Supporting Affidavit of Paul Kiprop Kandie is comprised of blatant falsehoods merely geared towards persuading the Court to grant the orders sought. In Paragraphs 6 to 15, the Plaintiff set out specific instances, supported by Annexures AK-1 to AK-10, when the Defendant and its directors/agents were served with process pertinent to this suit, to demonstrate that the Defendant and its directors were all along aware of the existence of this suit and the orders made herein well before the directors were served with Notice to Show Cause. Thus, the contention of the Plaintiff was that the Defendant is truly indebted to it and that the debt stood at Kshs. 18,430,128.83 as at 31 July 2012 on the basis of the Decree dated 25 May 2012; and therefore that the Defendant does not have any plausible defence to its claim.

[4] In the Further Replying Affidavit, it was deposed that the Defendant's indebtedness to the Plaintiff arose from two Overdraft Facilities granted to the Defendant vide the Plaintiff's Letters of Offer dated 24 May 2007 and 23 February 2008, respectively (marked Annexures SC-1 and SC-2); and that prior to the institution of this suit, the Plaintiff had, vide a letter dated 27 April 2009 demanded from the Defendant a sum of Kshs. 11,657,105.52 then due and owing; and that the directors of the Defendant, Benjamin K. Tanui and Paul Kiprop, promised to make payment but failed to honour their promise. Thereafter, the Defendant was served with a demand letter via registered post, which letter was not returned unclaimed. Thus, it was the contention of the Plaintiff that the Defendant was all along aware of the debt and that it was clear that there is no valid defence to the Plaintiff's claim to warrant the issuance of the orders sought.

[5] As to whether the firm of M/s Robson Harris & Company Advocates  should be granted leave to come on record    after Judgment, I note that the Defendant merely cited Order 9 of the Civil Procedure Rules, without any reference to any particular provision. Nevertheless, Rule 9 does stipulate that:

"When there is a change of advocates, or when a party decides to act in person having previously engaged an advocate, after judgment has been passed, such change or intention to act in person shall not be effected without an order of the court--

(a) upon an application with notice to all the parties; or

(b) upon a consent filed between the outgoing advocate and the proposed incoming advocate or party intending to act in person as the case may be."

[6] For the reason that the Defendant did not participate in these proceedings before the default judgment was entered, it is, to my mind, a misnomer for the Defence Counsel to seek leave to come on record, purportedly under Order 9 Rule 9 of the Civil Procedure Rules, as no such leave is required. In this regard, I note that reliance was placed by Counsel on the decision of Radido, J. in Kazungu Ngari Yaa vs. Mistry V. Naran Mulji & Co. [2014] eKLR, but in essence that decision does not support the Defence position. To the contrary, the Court in that case expressed the view that:

"In the present case, the Respondent did not file a Response or participate in the proceedings and therefore there is no previous advocate that the firm which is coming on record, Musinga & Co. Advocates, can seek written consent from. And even if the Respondent proposed to act in person, there is no other entity it could seek consent from. Order 9 rule 9(b) of the Civil Procedure Rules, 2010 is consequently inapplicable...Order 9 rule 9(a) of the Civil Procedure Rules, 2010 is equally inapplicable. To hold otherwise would lead to an absurdity. There was no advocate on record previously engaged for the Respondent and the Respondent is not proposing to act in person, and there would be no logic in the    Respondent's advocate giving notice to his client that he proposes to come on record for it and then seeking leave of Court."

[7] I would be of the same view. Hence, all that was required of the Defence Counsel in the circumstances hereof, was to simply file a Notice of Appointment pursuant to Order 9 Rule 7 of the Civil Procedure Rules, notwithstanding that Default Judgment had been entered; and cause the same to be served on the Plaintiff. Accordingly, Prayer 3 in the Defendant's Notice of Motion dated 5 October 2015 is untenable, if not altogether misconceived.

[8] On whether sufficient cause has been shown by the Defendant for the setting aside of  the default judgment recorded herein 20 May 2012, Order 10 Rule 11 of the Civil Procedure Rules provides that:

"Where judgment has been entered under this Order the court may set aside or vary such judgment and any consequential  decree or order upon such terms as are just."

[9] Thus, the provision aforestated does bestow on the Court unfettered discretion to set aside or vary any default judgment, so long as it does so upon such terms as are just on the basis of rational considerations. Thus, in Patel vs. East Africa Cargo Services Ltd (1974) EA 75 this principle was expressed thus:

"The main concern of the court is to do justice to the parties and the court will not impose conditions on itself to fetter the wide discretion given to it by the rules ... where it is a regular judgment as is the case here the court will not usually set aside the judgment unless it is satisfied that there is a defence   on the merits."

[10]  Accordingly, it is imperative for the Court to ascertain, first and foremost, whether the impugned default judgment was regularly entered or not; for, if it be the case that the judgment is an irregular judgment then the court would be obliged to set it aside ex debito justitiae. This distinction was well expounded in the case of Fidelity Commercial Bank Ltd Vs. Owen Amos Ndung'u & Another, HCCC No. 241 of 1998 (UR), by Njagi, J. (as he then was) thus:

"A distinction is drawn between regular and irregular judgments. Where summons to enter appearance has been served, and there is default in the entry of appearance, the ex parte judgment entered in default is regular. But where ex parte judgment sought to be set aside is obtained either because there was no proper service or any service at all of the summons to enter appearance, such a judgment is irregular, and the affected defendant is entitled to have it set aside as of right."

[11] The record shows that the Defendant was served with Summons to Enter Appearance together with a copy of the Plaint by registered post on 6 January 2012 by a Process Server known as Isaac Koli Nduya. He accordingly swore an Affidavit of Service to that effect on 20 January 2012 and attached the pertinent documentation in support of his averments. However, according to the Defendant, service of the Plaint and Summons to Enter Appearance was not properly effected upon it. Citing Order 5 Rule 3 of the Civil Procedure Rules, it was the submission of Counsel for the Defendant that personal service ought to have been made upon the secretary, director or some other principal officer of the corporation. The Defence Counsel relied on the case of Lochab Brothers Limited vs. Lilian Mumbi Ng'ang'a & 2 Others [2014] eKLR in support of his submission that no effort at all was made by the Process Server to try and effect personal service on the directors of the Defendant.

[12] Order 5 Rule 3 of the Civil Procedure Rules is explicit that:

"Subject to any other written law, where the suit is against a corporation the summons may be served--

(a) on the secretary, director or other principal officer of the  corporation; or

(b) if the process server is unable to find any of the officers of the corporation mentioned in 3(a)--

(i) by leaving it at the registered office of the corporation;

(ii) by sending it by prepaid registered post or by a licensed courier service provider approved by the court to the registered postal address of the corporation; or

(iii) if there is no registered office and no registered postal address of the corporation, by leaving it at the place where the corporation carries on business; or

(iv) by sending it by registered post to the last known postal address of the corporation."

[13]  In the Affidavit of Service sworn by Isaac Koli Nduya on 20 January 2012, it was deposed that, upon receiving the Summons to Enter Appearance and Plaint, the Process Server visited the Defendant's premises at their last known address in Bungoma on 8 December 2011, and learnt that the  Company had sold the depot and moved to Eldoret Town. That on 14 December 2011, he proceeded to Eldoret Town and traced the Defendant's place of business and found a lady by the name Immaculate who introduced herself to him as a sister to the two directors of the Defendant, Benjamin Kimeli Tanui and Paul Kiprop Tanui; and that she confirmed their directorship of the Defendant but added that they were away on a business trip. It was further averred by Mr. Nduya that on 5 January 2012, he again proceeded to Eldoret Town and found Immaculate; and she directed him to Highland Tobacco Wholesalers, which she said was one of the businesses newly opened by the same directors of the Defendant. He accordingly proceeded to Highland Tobacco Wholesalers but did not find the Defendant's directors, who were said to be away on business. Having made the foregoing attempts, the Process Server decided to serve the Defendant through registered post on 6 January 2012 vide the Certificate of Postage No. 538,as per the documents annnexed to that Affidavit of Service.

[14] Clearly therefore, the service of the Plaint and Summons to Enter Appearance was effected in strict adherence to the stipulations of the rules of procedure set out in Order 5 Rule 3 of the Civil Procedure Rules, and that this was only done after several attempts had been made in vain to effect personal service on the Defendant, and on its directors and/or principal officers. Indeed the record does show that prior efforts had been made by one Faustus Alunga Mulama of Faalum General Agencies to serve the same documents on one of the directors of the Defendant, but that service was disapproved by the Court on the ground that the Process Server had effected service through the Secretary of the director. In the premises, I find the cases of Lochab Brothers Limited and Total Kenya Limited vs. Super Hauliers Ltd HCCC No. 939 of 2002

distinguishable.

[15] Having found that the Summons to Enter Appearance and Plaint were duly served on the Defendant, it follows that the default judgment was regularly entered. And where that is the case, it is trite that the court ought to be slow in setting it aside. In James Kanyiita Nderitu & Another vs. Marios Philotas Ghikas & Another [2016] eKLR, the Court of Appeal restated the distinction aforementioned and held that:

From the outset, it cannot be gainsaid that a distinction has always existed between a default judgment that is regularly entered and one, which is irregularly entered. In a regular default judgment, the defendant will have been duly served with summons to enter appearance, but for one reason or another, he had failed to enter appearance or to file defence, resulting in default judgment. Such a defendant is entitled, under Order 10 rule 11 of the Civil Procedure Rules, to move the court to set aside the default judgment and to grant him leave to defend the suit. In such a scenario, the court has unfettered   discretion in determining whether or not to set aside the default judgment, and will take into account such factors as  the reason for the failure of the defendant to file his memorandum of appearance or defence, as the case may be; the length of time that has elapsed since the default judgment was entered; whether the intended defence raises triable issues; the respective prejudice each party is likely to suffer; whether on the whole it is in the interest of justice to set aside the default judgment, among other. See Mbogo & Another v. Shah (supra), Patel v. E.A. Cargo Handling Services Ltd (1975) EA 75, Chemwolo & Another v. Kubende [1986] KLR 492 and CMC Holdings v. Nzioki [2004] 1 KLR 173).

[16] The Defendant herein has simply denied having borrowed money from the Plaintiff without more; while at the same time conceded that "...if indeed it borrowed/obtained any facility from the Plaintiff the same did not amount to the sum of Kshs. 14,397,305.50..." It did not exhibit a draft Defence to demonstrate whether indeed there are triable issues raised worth setting aside the regular judgment for. I therefore find no merit in the application dated 5 October 2016 and would dismiss it with costs.

It is so ordered.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 10TH DAY OF NOVEMBER, 2017

OLGA SEWE

JUDGE